The Canadian mining company, Allana Potash, is going to invest USD 750 million on the Dallol potash mine in the Afar Regional State.
Allana plans to start construction of the potash mine found in north-east Ethiopia early next year and start production at the end of 2015. Allana Potash is investing in Ethiopia through its subsidiary company, Allan Potash Afar Private Limited company.
Allana Potash Afar on Tuesday singed a large-scale mining agreement at the Sheraton Addis. The agreement will enable Allana to exploit the potash deposit estimated at 3.2 billion tonnes. Nejib Ababiya, co-founder and manager of Allana Potash Afar, and Sinkenesh Ejigu, the Minister of Mines, signed the mining agreement.
After signing the agreement, Nejib said his company has been conducting exploration work in the Dalol depression for the past five years. Nejib said the company discovered a potash deposit estimated at 3.2 billion tonnes in the license area, adding that it spent about 80 million dollars on the exploration work.
“When we started the project the area was a barren desert. It was a very difficult area to work in and Ethiopia was not considered as an investment destination. Our management board did a tremendous work in promoting Ethiopia and exploration work for the last five years. We spent 80 million dollars in the Afar region. By doing so we drilled many holes and we have done lots of work not only to find potash but also to learn the of the area,” Nejib told local reporters.
“Based on our exploration work we submitted a bankable to the ministry six months ago. And the ministry, after reviewing it thoroughly, gave us a feed-back and what not and eventually submitted it to the council of ministers for endorsement.” The mining license was approved by the Council of Ministers last Friday.
According to the agreement, the license area covers 310 sq. km and the company has an exclusive right for large-scale mining potash within the license area for the coming 20 years and it will be renewed for ten years. The company has allocated 653, 304,624 dollars initial investment capital. When it starts mining, the company will produce one million tonnes of potash every year and shall create for 800 Ethiopians, according to the ministry.
Sinkenesh assured executives of Allana that the government will provide every assistance the company requires. The minister said the company should follow the country’s mining laws and directives and commence production work according to schedule. According to the minister, due to the favorable investment climate, the government has created more than 148 companies that secured 262 exploration and mining licenses for operating in the country.
Mining experts knew that potash deposit was found in the Afar region but it has not been exploited for years. An American company surveyed the Dalol depression in the 1950s. And during the Italian occupation Italians used to ship potash to their country through the Port of Massaw. In the late 1980s, a Norwagian company, Norex Skydro, was trying to develop the potash mine but it relinquished the project in the aftermath of the bloody Ethio-Eritrean border war that broke out in May 1990.
Allana plans to build the mine in the Dalol depression, the shallowest and hottest place in the world, 740 km north-east of Addis Ababa. The company plans to mine one million tonnes of potash and export it through the port of Tajura.
According to Nejib, construction will commence in 2014 and will be completed and start production at end of 2015. The potash deposit is estimated at 3.2 billion but the company will start producing the 27 million tonnes of pure potash deposit called salvanite. “For the time being the plan is to produce one million tonnes of potash per annum for the next 20 years.” On the international market, the price of one tonne of potash is 430 million dollars. By exporting one million tonnes of potash the company plans to earn 430 million dollars a year. According to Nejib, the company will invest 750 million dollars.
Asked if the potash will be only for the international market, Nejib said Allana will build a fertilser factory that will process the potash. “At the beginning we were thinking of the Asian market. But after working with the Agricultural Transformation Agency, we learnt that there is a huge demand for potash fertilizer. So now we know that we can supply the potash fertilser for Ethiopian and other African countries,” Nejib said.
Sinkenesh said that Ethiopia has been importing and using urea and dap. However, she said recently it was recently learnt that the land requires potash fertilizer. The Minister hopes that Allana will fulfill the local potash demand.
If everything goes according to plan, Ethiopia will be the first east African nation to produce potash. Twelve countries produce potash so far. Canada produces 50 percent of the global potash production while Russia and Belarus supply 40 percent of the global potash product. Russia and Belarus had cartel agreement in setting global potash price. However, due to a disagreement that flared up between the two countries recently in connection with the price fixation the price of potash has declined. The price of a tonne of potash which was 430 dollars per tonne has dropped to 400 or less.
Nejib said investors are now reluctant to invest in a potash mine due to the price decline. However, he said Allana will keep its words and invest in the Dalol potash mine. “We believe that this is a temporary problem and we will bring the FDI we pledged to invest and execute the work we planned,” Nejib said.